Oddly Static Economic Analysis from Elliot Spitzer

The Defense Department and the city of New York are among the largest purchasers of guns. If the president and the mayor truly believe that semi-automatic weapons should not be available to private purchasers, and that magazines with more than 10 bullets should not be sold over the counter, they should simply say that, from now on, the federal government and the city of New York, as a matter of public safety, will not buy any weapons or ammunition from companies that do not agree to pull semi-automatics from their stock and refuse to produce magazines with more than 10 rounds other than for sale to the government. President Obama and Mayor Bloomberg should announce that semiautomatic handguns with high-capacity magazines — the kind used in Oak Creek; Aurora, Colo.; Tucson, Ariz.; and Virginia Tech — can no longer be sold to private citizens by any company that wants to do business with the federal government and the city of New York.

The major gun manufacturers will agree to the limits imposed by their major customers.

Use the power of the government as a purchaser, as a consumer, to get the companies marketing these products to change their behavior. And do it now. Stop blaming the legislature and act, immediately.

I’ll post a separate item about the constitutional, criminological, and political questions that this raises, but for now I want to focus on an economic issue.

Spitzer’s analysis, it seems to me, uses a remarkably static view of economics. Let’s even assume, as Spitzer apparently does, that most of the current manufacturers of semiautomatic weapons (or large magazines) sell a lot to the federal government and to the City of New York, and therefore will go along with Spitzer’s proposed governmental demands. But consumers presumably will still want to buy semiautomatics (see item 2 below) and high-capacity magazines.

If you were a small gun manufacturer, or a would-be gun manufacturer, wouldn’t you see this as a market opportunity? All the big guys, by hypothesis, are no longer serving this market — but you can get a huge share of it, simply by forgoing selling to the federal government and the New York City government (a market that you, as a small or new manufacturer, likely can’t exploit in any event). So in you go, the consumers buy from you (via existing gun dealers, who’ll be happy to sell your product), and the semiautomatics and large-capacity magazines will remain just as prevalent.

Only by hypothesizing that the market is static — that causing existing manufacturers to stop selling certain weapons to the public will only have the intended consequences and no unintended consequences that stem from how the market will change in response to the proposal — could Spitzer’s proposal be effective at accomplishing Spitzer’s goals (even assuming those goals are sound). But markets aren’t static, and the consequences of government action aren’t limited to those that the government intends. The dynamic that I describe is basically certain to come to pass, yet Spitzer’s “How to Make the Government Work” column doesn’t even mention it. Or am I missing something?